Legislature(1993 - 1994)
03/03/1993 08:30 AM FSH
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 123: LOANS FOR IFQ'S Number 450 REPRESENTATIVE FRAN ULMER, PRIME SPONSOR of HB 123, requested teleconference witnesses be allowed to testify first. DREW SCALZI, REPRESENTATIVE OF THE NORTH PACIFIC FISHERIES ASSOCIATION testified from Palmer that his group endorsed HB 123 and was very encouraged by the bill. He admitted the IFQ (individual fishing quota) plan had been very controversial and felt it would behoove the state to research the issue before making the loan applications available when the IFQ's came up for sale. PAUL SEATON, a PALMER FISHERMAN, stated HB 123 was premature as the IFQ plan was not finalized. Additionally, the loan program might have problems because it might be unconstitutional to harvest any of the IFQ fish within natural waters of the state. He exclaimed that the program was creating a situation where salmon harvesting would be unconstitutional within Alaskan waters. The 1972 amendment, known as the limited entry amendment allowed for a permit restriction, limiting access to a public resource, not privatization of a public resource. The amount of capitalization required should also be addressed, he believed. MAKO HAGGERTY, A HOMER FISHERMAN, testified from Homer in opposition to HB 123 for several reasons. He felt the bill was poorly researched as he had been a crewman and a skipper, and under the IFQ program, he stood to get no quota shares. He stated that if he wanted to start a business with no quota shares and go to the state to borrow money to buy quota shares, paying $10 per share, he would never be able to pay it off. It would take at least 20 years to pay off a $100,000 loan on 10,000 shares with interest. Although the intentions were good, he believed HB 123 made little practical sense and the numbers did not add up. The people who will benefit are those large operations that already have initial IFQs, and those who were economically dependent on commercial fishing for their livelihood would not benefit, he added. CHAIRMAN MOSES assured Mr. Haggerty there were proposed amendments which would perhaps address some of his concerns. Number 541 CHRIS MOSS, REPRESENTATIVE OF THE NORTH PACIFIC FISHERIES ASSOCIATION, testified from Homer. He supported HB 123 and its companion bill, SB 96 as those bills gave assets and loans to those in the industry who were least able to afford them. He believed this would allow people with residency and experience, but with few assets, to acquire an initial allocation. Number 550 ANNA BORLAND-IVY, A DECKHAND ON A HOMER CHARTER BOAT, testified from Homer. She opposed HB 123 as initial IFQ owners would benefit and the smaller operations who needed the loans would not. Number 550 BILL SULLIVAN, A CREWMAN ON A HOMER FISHING BOAT, testified from Homer in opposition to HB 123. As a crewman, he would receive no initial allocation to a quota share, and he felt Alaskans should not have to take out loans to capture fish that already belonged to Alaskans. DAN FALVEY, A MEMBER OF THE ALASKA LONGLINE FISHERMEN'S ASSOCIATION, testified from Sitka. He expressed his support for HB 123 as state involvement might help keep prices under control. He felt the start-up limit of $5 million was not enough money. With a new program like IfQs, he thought the turnover rate would be sufficiently high at first. Additionally, he hoped to see the IFQ program funded as well as the state's salmon limited entry permit program. He also would like to see a second parallel loan program to provide Native groups, municipalities and the like with low interest loans. ERIC JORDAN, A SITKA FISHERMAN, speaking from Sitka, thanked Representative Ulmer for her work on HB 123, but noted a few problems. He said the $5 million total was not enough to start the program - perhaps $100 million would suffice. He then said there might be problems with constitutionality and the state might need new laws to complement the federal IFQ regulations. He also felt the state needed to invest in an Alaska IFQ acquisition program. MATT DONOHOE, A SITKA RESIDENT, testified from Sitka. He said the IFQ program was a major economic disaster for coastal communities in Alaska, and agreed the $5 million was not sufficient funding for the program. TAPE 93-9, SIDE B Number 000 MR. DONOHOE added that before such a loan program could begin, goals for the program should be organized. He also said there must be some way to protect the small fishermen within the program. Number 040 LINDA KOZAK, A MEMBER OF THE KODIAK LONGLINERS ASSOCIATION spoke to the committee from Kodiak. She endorsed HB 123 as IFQs were good for the future of Alaskan fishermen, if the program was designed to benefit Alaskans, specifically. She felt vessel owners should be able to go to a lending institution and acquire quota shares to develop markets for their product. She opposed the section of HB 123 which provided that individuals would not be eligible for alternative sources of financing to purchase quota shares. Lastly, she noted her concern for the low amount of initial financing of the program. Number 090 KRIS NOROSE, DIRECTOR OF THE PETERSBURG VESSEL OWNERS ASSOCIATION testified from Petersburg and said she endorsed HB 123. Now that the IFQ program has been adopted, the state should allow for the public purchase of these quotas. The current limited entry permit loan program has been a great success in allowing Alaskans to participate in the fisheries along the coast. This was also an opportunity for non-initial IFQ receivers to enter into the program, she believed. BILL HALL, representing the COMMERCIAL FISHING AND AGRICULTURE BANK, spoke to the committee from Anchorage. He had been asked by Representative Ulmer to comment on a proposed letter of intent regarding SeaFad's letter of intent regarding its role in financing IFQs. He suggested the committee look into IFQs more thoroughly, but advised that he had no objection to the letter of intent. CHRIS BERNS, A KODIAK RESIDENT, testified from Kodiak in opposition to the loan program because of the lack of research in the price per quota share. Number 209 ERIC FORRER, A RETIRED SETNETTER FROM THE YUKON RIVER, commented on the difficulty for young fishermen to get into the business in Alaska based on hard work. The IFQ program was important and must be put in place and supported, and halibut quotas must stay in the state, he stressed. Number 265 MARY MCBURNEY, EXECUTIVE DIRECTOR, CORDOVA DISTRICT FISHERMEN UNITED, testified from Cordova. She endorsed HB 123 and felt the IFQ was a logical program to allow people to buy into IFQ fisheries and promote local ownership. REPRESENTATIVE ULMER responded to some of the points raised from the testimonials. She said the timing of the applicability of the federal regulations and the allocations were rather unclear. If the legislature waited to see when the regulations would be in place, then Alaskan fishermen would be out of luck, she believed. REPRESENTATIVE ULMER commented on the community allocations and that a program to mirror the Commercial Development Quota (CDQ) program was a good idea. She noted some new language for CSHB 123, on page 2, line 29, that would read "are not eligible for financing to purchase quota shares from other recognized, commercial lending institutions." She believed this change should address the concerns about loan sharks from the folks in Sitka. She also noted additional language in the proposed CSHB 123 that clarified the program was aimed at helping small fishermen the most. Lastly, she asked that the committee adopt the CS with the proposed changes on page 2, as well as the proposed letter of intent. Number 342 GREG WINEGAR, LOAN MANAGER, JUNEAU LENDING BRANCH, ALASKA DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT (DCED), noted the DCED's support for HB 123. The overall purpose of the bill was consistent with the goals in the commercial fishing program; that being to promote a resident fishery, he noted. REPRESENTATIVE DAVIDSON asked Mr. Winegar if he saw any problems with HB 123 or if the bill could work against Alaskan interests. He also asked about the collection process for loans if a borrower suffered from deflated halibut prices years after taking out a loan. MR. WINEGAR addressed one of the concerns from the teleconference regarding debt service and if fishermen could afford to get loans through this program. He also said the DCED looked closely at the debt service of the borrower, and historically there had been a low default rate. He advised the committee of a soft collection program and of work with fishermen through an extension process. RICHARD LAUBER, LOBBYIST FOR PACIFIC SEAFOOD PROCESSORS ASSOCIATION, offered to answer questions as he had spoken at the last meeting. REPRESENTATIVE DAVIDSON asked Mr. Lauber if he could note any problems with the program, to be analyzed in the next committee of referral. MR. LAUBER stated HB 123 was designed to stop the migration of quota shares to outside interests. However, non- residents or residents with these shares might decide to go south with their product. The more shares a person had, the more likely they were to go south with their product, yet the smaller operations would probably sell locally so the funds go through the local community, he said. MR. LAUBER continued by noting that if fish were caught off- shore and went south, Alaska collected no tax. If caught offshore and taken to Petersburg, for example, then the state received the tax. The state wished to encourage participation onshore for tax purposes, but also wanted participation onshore so local economies and employment did not suffer. Number 430 REPRESENTATIVE ULMER noted she had done research about the landing issue and discovered that enforcement personnel logged landings at 16 primary ports, while other ports were spot checked by officers randomly. Boats were supposed to radio in after a catch, at least six hours before delivery, with estimated arrival time and catch weight. At delivery, the catch would be logged and recorded against the IFQ. REPRESENTATIVE ULMER pointed out any product destined for a non-Alaskan port must be checked through one of the 16 primary ports in Alaska. Shipments outside Alaska would be sealed by enforcement officers as Alaskan products and checked for regulatory compliance. All shipments of frozen fish must be through a primary port. Further, she noted these proposed regulations solved the problems of outside shipments. MR. LAUBER commented that boats might be hesitant to check into one of the ports as they would be taxed for the product. The check-in was merely an in-transit federal rule for enforcement purposes, to ensure no sale was taking place. To tax the product might be a violation of the interstate commerce clause to pose a tax, if the boats were selling their product elsewhere. He further noted the proposed legislation from years ago, which dealt with a landing tax for processed products and boats that actually sold their products in Alaska. He then differentiated that the current issue was that the product would not actually be landed in Alaska, but would merely have to come to port for enforcement purposes, and then be transported elsewhere. REPRESENTATIVE HARLEY OLBERG MOVED to ADOPT CSHB 123, as amended, with the letter of intent and fiscal note, and MOVE from the committee with individual recommendations. ADJOURNMENT CHAIRMAN MOSES asked members and the public if there were further comments. Hearing none, he adjourned the meeting at 10:00 a.m.